Was planning on buying a M1, but was going to get the barrel cut to 10.5 inch. Can that be done? And can it be milled to take the drum mags?

You can buy a 10.5 barrel from Kahr Arms, and have it installed.

The M1 Thompsons were designed not to take the drums, so no I don`t think that you could re-work it.

You could get a 1927A1, install the 10.5 barrel and get a horizontal foregrip. That way you could have a drum.

You can't shorten the Thompson barrels.  
The taper is such that once you cut it off, you can't install a front sight or Cutts compensator.
Note that Thompson barrels has an enlarged area on the muzzle that fits the front sight or Cutts.  
A shortened barrel won't have the enlarged area, and the diameter of the barrel is too small.

You can have a standard 10" Thompson barrel installed, but this is NO job for the local gunsmith or the do-it-yourselfer.  The Thompson barrels are torqued in TIGHT, and the forearm bar that extends from the receiver interferes with getting a good barrel vise setup.
This is a Pro ONLY job, and they had better have the right tools and their stuff together.

To convert an M1 type gun to use drums would require major milling of both the receiver and trigger group.

How much am i looking at for the barrel swap?

Quoted: How much am i looking at for the barrel swap?

Why not just buy the SBR from Auto-Ordnance.  They sell them that way now.

Quoted: Quoted: How much am i looking at for the barrel swap? Why not just buy the SBR from Auto-Ordnance.  They sell them that way now.

Heard the old one was better, and i can get the gun, barrel and tax stamp and be cheaper than new.

I don't know the pricing, but there's several Thompson gunsmith's that do SBR and other custom Semi work:

www.hudsontradingpost.com/

www.tommygunner.com/pages/guns4sale/

There's also a very well known customizer in Colorado?? who does very well rated work.
He's known for altering the semi's too look almost exactly like a full-auto.
I can't find his name, but if you search some of the gun forums you should find him, or find the full-auto forums.

Quoted: Quoted: Quoted: How much am i looking at for the barrel swap? Why not just buy the SBR from Auto-Ordnance.  They sell them that way now. Heard the old one was better, and i can get the gun, barrel and tax stamp and be cheaper than new.

I had a pre-kahr Auto-Ordnance 1911 which was the biggest hunk of shit firearm I've ever owned.  Not sure if that translates to their long guns, but since the day I parlayed that boondogle of a purchase off on someone else I swore I'd never buy another auto-ordnance product so long as I had life in my body.  

That said, when you say "gun, barrel and tax stamp" does that also include the gunsmithing fee to put the barrel on the gun?  I've found that those additional gunsmith fees sometimes turn what appeared to be a good idea at the time into something which only leaves me with a frown on my face and a hole in my wallet.

The guy that does the work in Colorado is Paul Krogh. He does awsome work and is really nice. You can go to Machinegunbooks.com and all they talk about is the Thompson.